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0 pointshga16y ago0 comments

"Peg" is a wrong word to use here, it's got the wrong connotations.

Oil is priced in dollars: if you want to buy oil on the open market/from an OPEC nation, you have to pony up dollars to buy it. That says nothing about how many dollars are required ... e.g. look at what happened starting in the early '70s when Nixon closed the gold window. (I must say it's nice to be on a forum where I can reasonably expect people to know such references.)

As for your second paragraph in toto ... I'm not sure the linkages will work that way.

As for the Continental problem ... yeah, you could be right, I've certainly heard that was a factor, but the bottom line remains the same.

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2 comments · 1 top-level

yannis16y ago· 1 in thread

The Gulf currencies are literally pegged to the Dollar. It's a fixed rate for the last 5 years that I had dealings with them (Qatar, UAE, Bahrain, Kuwait etc). But I agree nothing stops oil prices sky-rocketing.

I must say it's nice to be on a forum where I can reasonably expect people to know such references

Best forums on the web on any topic and to top it very civilized:)

hgaOP16y ago

Sorry about that, I didn't know the Gulf states had actual pegs (they were omitted from a list I'd recently read) and therefore misread your starting sentence.

However if the US$ started a sharp secular decline unrelated to anything happening in the Gulf (suppose the Fed uses QE to fund the Federal deficit for too long), they could change their pegs and I would imagine that in and of itself wouldn't be viewed negatively.

(Of course in such an event there would be so much financial chaos... well, "Sufficient unto the day is the evil thereof.")

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